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On the synergy between disclosure and investment beauty contests

Author

Listed:
  • Arya, Anil
  • Mittendorf, Brian

Abstract

Many investments are noted for their "beauty contest" features in that decision makers desire conformity with others׳ choices due to inherent complementarities. This paper examines the incentives of firms to take preemptive action and publicly disclose their investments in such beauty contests. In this case, it is the beauty contest desire for coordination that incentivizes a firm to disclose because doing so allows it to convey information that establishes norms and thereby influence subsequent actions of others. Disclosure recipients too benefit from this arrangement because they access additional information on which to base their decisions.

Suggested Citation

  • Arya, Anil & Mittendorf, Brian, 2016. "On the synergy between disclosure and investment beauty contests," Journal of Accounting and Economics, Elsevier, vol. 61(2), pages 255-273.
    • Handle: RePEc:eee:jaecon:v:61:y:2016:i:2:p:255-273
    DOI: 10.1016/j.jacceco.2015.11.003
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    Citations

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    Cited by:

    1. Jinzhi Lu, 2022. "Limited Attention: Implications for Financial Reporting," Journal of Accounting Research, Wiley Blackwell, vol. 60(5), pages 1991-2027, December.
    2. Gaoqing Zhang, 2021. "Competition and Opacity in the Financial System," Management Science, INFORMS, vol. 67(3), pages 1895-1913, March.
    3. Gao, Pingyang & Jiang, Xu, 2018. "Reporting choices in the shadow of bank runs," Journal of Accounting and Economics, Elsevier, vol. 65(1), pages 85-108.
    4. Biehl, Henrike & Bleibtreu, Christopher & Stefani, Ulrike, 2024. "The real effects of financial reporting: Evidence and suggestions for future research," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 54(C).
    5. Ferracuti, Elia & Stubben, Stephen R., 2019. "The role of financial reporting in resolving uncertainty about corporate investment opportunities," Journal of Accounting and Economics, Elsevier, vol. 68(2).
    6. Cyrus Aghamolla & Carlos Corona & Ronghuo Zheng, 2021. "No reliance on guidance: counter‐signaling in management forecasts," RAND Journal of Economics, RAND Corporation, vol. 52(1), pages 207-245, March.

    More about this item

    Keywords

    Beauty contests; Disclosure; Private information;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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